Hackers Allegedly Compromised, Liquidated Brokerage Accounts Through Fraudulent Trades
NEWARK, NJ—A Russian national living in New York has been charged for his alleged role in a ring that stole approximately $1 million by hacking into retail brokerage accounts and executing sham trades, U.S. Attorney for the District of New Jersey Paul J. Fishman announced today.
Petr Murmylyuk, aka “Dmitry Tokar,” 31, of Brooklyn, New York, has been charged by complaint with one count of conspiracy to commit wire fraud, unauthorized access to computers, and securities fraud. The U.S. Securities and Exchange Commission (SEC) is also filing a parallel civil action. Murmylyuk is currently in state custody facing charges arising out of a separate investigation conducted by the Manhattan District Attorney’s Office and will appear in Newark federal court to face the conspiracy charge on a date to be determined.
“Hackers continue to find new and advanced ways to steal from the financial sector,” said First Assistant U.S. Attorney J. Gilmore Childers. “Through the illusion of legitimacy, these alleged hackers controlled both sides of securities transactions to game the market and drain their victims’ accounts. Those who use their computer skills for fraud underestimate the combined resolve of law enforcement and the financial services industry to detect and stop these crimes.”
“This investigation highlights the level of sophistication reached by individuals involved in computer intrusions and hacking activities in furtherance of complex economic and financial crimes,” said FBI Newark Division Assistant Special Agent in Charge David Velazquez. “The same level of sophistication must be maintained by federal investigators and prosecutors, together with private sector partners, to stay one step ahead of these individuals.”
According to the complaint unsealed today in Newark federal court:
Beginning in late 2010, Murmylyuk worked with others to steal from online trading accounts at Scottrade, E*Trade, Fidelity, Schwab, and other brokerage firms. Members of the ring first gained unauthorized access to the online accounts and changed the phone numbers and e-mail addresses on file to prevent notice of unauthorized trading from going to the victims.
Once the hackers controlled the accounts, they used stolen identities to open additional accounts at other brokerage houses. They then caused the victims’ accounts to make unprofitable and illogical securities trades with the new accounts—referred to in the complaint as the “profit accounts”—that benefitted the hackers.
One version of the fraud involved causing the victims’ accounts to sell options contracts to the profit accounts, then to purchase the same contracts back minutes later for up to nine times the price. In another version of the fraud, they used the profit accounts to offer short sales of securities at prices well over market price and to force the victim accounts to make irrational purchases. (A short sale is a sale of stock that an investor does not own but rather borrows from a stock lender and must eventually return.)
Murmylyuk and a conspirator recruited foreign nationals visiting, studying, and living in the United States—including Russian nationals and Houston residents Anton Mezentsev, Galina Korelina, Mikhail Shatov, and others—to open bank accounts into which illegal proceeds could be deposited. Murmylyuk and the conspirator then caused the proceeds of the sham trades to be transferred from the profit accounts into those accounts, where the stolen money could be withdrawn.
Fidelity, Scottrade, E*Trade, and Schwab have reported combined losses to date of approximately $1 million as a result of the fraudulent schemes.
Murmylyuk is also accused of placing a telephone call to Trade Station Securities in which he claimed to be “Dmitry Tokar,” through whose brokerage account the ring placed approximately $200,000 in fraudulent securities trades. Murmylyuk was arrested in Brooklyn on November 3, 2011, in possession of a laptop that evidenced the fraud.
Mezentsev, Korelina, and Shatov were previously charged in the District of New Jersey and convicted of conspiracy to commit wire fraud based on their agreement to receive stolen money in the accounts in their names. U.S. District Judge Esther Salas sentenced Mezentsev, Korelina, and Shatov to 27 months, 14 months, and 14 months in prison, respectively, earlier this year.
If convicted, Murmylyuk faces a maximum potential penalty of five years in prison and a $250,000 fine.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge for the Newark Division Michael B. Ward; Immigration and Customs Enforcement-Homeland Security Investigations, under the direction of New Jersey Special Agent in Charge Andrew McLees; and Internal Revenue Service-Criminal Investigations, New York Field Office, under the direction of Acting Special Agent in Charge Victor W. Lessoff, for their work in the continuing investigation.
He also thanked special agents of the FBI in St. Louis and San Francisco and the U.S. Secret Service in Houston, as well as the Manhattan District Attorney’s Office, under the direction of District Attorney Cyrus R. Vance, Jr., for its contributions and cooperation in coordinating the parallel investigations. He also thanked the SEC’s Philadelphia Regional Office, under the leadership of its Regional Director Daniel M. Hawke, and the Justice Department’s Computer Crime and Intellectual Property Section for their assistance in the investigation.
The government is represented by Assistant U.S. Attorney Seth B. Kosto of the Computer Hacking and Intellectual Property Section of the U.S. Attorney’s Office for the District of New Jersey’s Economic Crimes Unit in Newark.
The charges and allegations in the complaint are merely accusations, and the defendant is considered innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For more information on the task force, visit Stopfraud.gov.